LDZ demand fell as the gas winter came to an end last week, while the supply side softened but remained brisk enough to support a net European stockbuild. Europe injected 0.34 bcm into storage last week, up from 17 mcm the same week last year and shrinking the y/y storage shortfall to 6.2 bcm from 6.5 bcm.
All of this helped ease average NBP D+1 prices over last week and keep those D+1 prices at a slightly larger discount to the April contract. However, prompt prices did start to gain a bit of value back through the latter part of the week, as the supply side started to show some weakness and power sector gas demand remained healthy.
In what has become something of a theme, customers have been reducing Russian nominations in recent weeks. Deliveries slipped to 2.59 bcm, down by 0.16 bcm w/w and by 53 mcm y/y. Norwegian flows are looking more steady, slightly up in both w/w and y/y terms.
LNG deliveries to Northwest Europe also dropped to 0.3 bcm in the week to 2 April from 0.55 bcm a week earlier, and were some 0.32 bcm down y/y. Still, UK sendout from the South Hook terminal improved compared to earlier in the month, and with several more deliveries added to the April schedule last week, there is evidence LNG is returning to Europe. Northwest terminals are scheduled to receive 0.74 bcm of LNG this week, 0.44 bcm more w/w and 0.28 bcm more y/y
In addition, there were several more LNG tankers sailing through the Suez Canal on Monday without declared destinations that are likely bound for Northwest European terminals. If Northeast Asian demand continues to wane, Europe should attract more Qatari and US LNG.
The French electricity grid continues to struggle, with 13 GW of nuclear capacity still offline and the country’s hydropower generation reservoirs at low levels due to the high level of spilling at the start of the year to help offset the nuclear shortfall. For the next few months at least, France will limit power exports, helping support European thermal generation.
In addition, aggregate LDZ demand in Italy, France, the Netherlands, the UK and Belgium is forecast to rise to 2.88 bcm in the current week to 9 April from 2.35 bcm last week, as temperatures drift towards the seasonal norm. That should limit continental storage injections.
Firmer coal prices at the end of last week also helped buoy gas prices, pushing them further above the next fuel-switch trigger. Higher LDZ demand and EDF’s nuclear outages should provide some limited support for gas prices, keeping them comfortably above that next fuel-switching trigger of 15.0 €/MWh. Given the expected increase in LNG arrivals, there is little reason for prices to drift up anywhere near the upper switching trigger of 16.9 €/MWh.
|Last week's changes in European balances and short-term outlook, mcm|
|Source: Country SOs, GSE, Energy Aspects|